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Option-Implied Correlations and the Price of Correlation Risk

Driessen, Joost - 2016

Motivated by extensive evidence that stock-return correlations are stochastic, we analyze whether the risk of correlation changes (affecting diversification benefits) is priced. We propose a direct and intuitive test by comparing option-implied correlations between stock returns (obtained by...

Persistent link: https://www.econbiz.de/10013007853

Cross-section without factors : correlation risk, strings and asset prices

Distaso, Walter; Mele, Antonio; Vilkov, Grigory - 2021 - This version: January 13, 2021

Many asset pricing theories treat the cross-section of returns volatility and correlations as two intimately related quantities driven by common factors, which hinders achieving a neat definition of a correlation premium. We formulate a model without factors, but with a continuum of securities...

Persistent link: https://www.econbiz.de/10012421289

Factor Investing, Learning from Prices, and Endogenous Uncertainty in Asset Markets

Dim, Chukwuma; Sangiorgi, Francesco; Vilkov, Grigory - 2021

We study learning and uncertainty under the factor investing paradigm using an endogenous information model with correlated assets. As investors shift attention from firms towards systematic risk factors, stock prices become less informative, increasing systematic uncertainty and incentivizing...

Persistent link: https://www.econbiz.de/10013247042

Beta risk in the cross-section of equities

Boloorforoosh, Ali; Christoffersen, Peter F.; Fournier, … - 2017

We develop a conditional capital asset pricing model in continuous-time that allows for stochastic beta exposure. When beta co-moves with market variance and the stochastic discount factor (SDF), beta risk is priced, and the expected return on a stock deviates from the security market line. The...

Persistent link: https://www.econbiz.de/10011646407

Using Equity, Index and Commodity Options to Obtain Forward-Looking Measures of Equity and Commodity Betas, and Idiosyncratic Variance

Ronn, Ehud I. - 2020

CAPM-based forecast of oil prices …

Persistent link: https://www.econbiz.de/10012824859

In Search of Beta

Gregory, Alan - 2016

Despite the arguments that can be made against using the CAPM, it is very widely used in regulation. In particular, it … this context in Germany. In addition, UK competition authorities make use the CAPM to assess profitability in the case of … “market investigations”. All of these applications require beta as an input into the CAPM, but the beta estimates employed …

Persistent link: https://www.econbiz.de/10013004869

Disagreement Beta

Gao, George - 2018

When two investors agree to disagree on market prospects and bet against each other, both expect to profit from their trades. Hence, an increase in disagreement leads to higher perceived trading profits and lower marginal utilities for both investors, so disagreement betas can affect...

Persistent link: https://www.econbiz.de/10012936009

Beta Risk in the Cross-Section of Equities

Boloor, Ali - 2019

We develop a continuous-time intertemporal CAPM model that allows for risky beta exposure, which we explicitly specify …

Persistent link: https://www.econbiz.de/10012899147

Asset Pricing Using Block-Cholesky GARCH and Time-Varying Betas

Grassi, Stefano; Violante, Francesco - 2021

Starting from the Cholesky-GARCH model, recently proposed by Darolles, Francq, and Laurent (2018), the paper introduces the Block-Cholesky GARCH (BC-GARCH). This new model adapts in a natural way to the asset pricing framework. After deriving conditions for stationarity, uniform invertibility...

Persistent link: https://www.econbiz.de/10013239060

Risk and Beta Anatomy in the Hedge Fund Industry

Savona, Roberto - 2012

Using a Bayesian time‐varying beta model, we explore how the systematic risk exposures of hedge funds vary over time conditional on some exogenous variables that managers are assumed to use in changing their trading strategies. In such a setting, we impose a structure on fund returns, betas...

Persistent link: https://www.econbiz.de/10013116243